If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated increase in aggregate demand will result in:
a. a decrease in both aggregate demand and short-run aggregate supply
b. an increase in short-run aggregate supply that will maintain full employment.
c. higher prices that will reduce aggregate demand to its original level.
d. a decrease in short-run aggregate supply that will maintain full employment.
d
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Price ceilings in the U.S. on retail gasoline sales in the 1970s caused
A) massive and prolonged shortages. B) increased advertising of gasoline. C) longer hours of operation at most service stations. D) poor people to be assured of an adequate supply of gasoline.
When the real interest rate rises
A) there is a downward movement along the demand for loanable funds curve. B) there is an upward movement along the demand for loanable funds curve. C) the demand for loanable funds curve shifts rightward. D) the demand for loanable funds curve shifts leftward.